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| 5 | |
What is the price of labor (w)? |
| | A) | $25 |
| | B) | $50 |
| | C) | $75 |
| | D) | $100 |
| | E) | none of the above |
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| 6 | |
What combination of labor (L) and capital (K) can produce 3,000 units of output at the lowest cost? |
| | A) | 10K, 110L |
| | B) | 42K, 52L |
| | C) | 60K, 20L |
| | D) | 90K, 60L |
| | E) | 110K, 10L |
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| 7 | |
What is the lowest possible cost of producing 3,000 units of output? |
| | A) | $6,000 |
| | B) | $4,500 |
| | C) | $3,000 |
| | D) | $1,500 |
| | E) | none of the above |
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| 8 | |
Why wouldn't the firm choose to produce 3,000 units of output with the combination at A? |
| | A) | At A, MRTS > 3/2. |
| | B) | At A, MPK / r > MPL / w. |
| | C) | At A, MPL > MPK. |
| | D) | both a and b |
| | E) | none of the above |
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| 9 | |
Why wouldn't the firm choose to produce 3,000 units of output with the combination at B? |
| | A) | At B, MRTS > 3/2. |
| | B) | At B, MPK / r < MPL / w. |
| | C) | At B, MPL < MPK. |
| | D) | both a and b |
| | E) | none of the above |
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| 10 | |
At the optimal combination of inputs for producing 12,000 units of output, what is the marginal rate of technical substitution? |
| | A) | 0.80 |
| | B) | 0.67 |
| | C) | 1.5 |
| | D) | 2.5 |
| | E) | impossible to tell from the graph |
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| 11 | |
If, at the optimal combination of inputs for producing 12,000 units of output, the marginal product of capital is 60, what is the marginal product of labor? |
| | A) | 30 |
| | B) | 50 |
| | C) | 62.5 |
| | D) | 90 |
| | E) | impossible to tell from the graph |
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| 12 | |
In the long run… |
| | A) | a firm is making the optimal input choice when the marginal rate of technical substitution is equal to the input price ratio. |
| | B) | the expansion path shows how the input marginal products change as the firm's output level changes. |
| | C) | all inputs are fixed. |
| | D) | both a and b |
| | E) | both b and c |
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| 13 | |
Which of the following are characteristics of a typical isoquant? |
| | A) | All input combinations on the isoquant will produce the same level of output. |
| | B) | A change in input prices shifts the isoquant map. |
| | C) | The marginal rate of technical substitution decreases as labor is substituted for capital by moving down the isoquant. |
| | D) | both a and b |
| | E) | both a and c |
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| 14 | |
The slope of an isoquant is… |
| | A) | the marginal rate of technical substitution. |
| | B) | MPK / MPL . |
| | C) | -ΔK/ ΔL. |
| | D) | both a and c |
| | E) | all of the above |
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| 15 | |
If the price of labor is $4 and the price of capital is $16,
what is the marginal rate of technical substitution at the optimal input choice? |
| | A) | 4.0 |
| | B) | 2.0 |
| | C) | 0.5 |
| | D) | 0.25 |
| | E) | none of the above |
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| 16 | |
Which of the following is (are) characteristics of an isocost
curve? |
| | A) | The slope shows the rate at which the firm can substitute labor for capital while
holding total cost constant. |
| | B) | All input combinations that will produce a given amount of output lie on the
isocost curve. |
| | C) | As a firm moves down its isocost curve, the firm’s output must be
decreasing. |
| | D) | both a and b |
| | E) | all of the above |
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| 17 | |
If the marginal rate of technical substitution of labor for
capital is 1.5, the price of labor is $20, and the price of capital is $10, then the firm… |
| | A) | can substitute one unit of capital for 1.5 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 |
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| 18 | |
If a firm is producing the level of output at which long-run
average cost equals long-run marginal cost, then… |
| | A) | long-run total cost is at its minimum point. |
| | B) | long-run marginal cost is at its minimum point. |
| | C) | long-run average cost is at its minimum point. |
| | D) | both b and c |
| | E) | all of the above |
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| 19 | |
If a firm is producing the level of output at which short-run
average cost equals long-run average cost, then… |
| | A) | the firm has chosen the profit-maximizing level of output. |
| | B) | with a fixed amount of capital, short-run average cost is greater than long-run
average cost at all other levels of output. |
| | C) | the firm has chosen the cost-minimizing combination of inputs to produce this
level of output. |
| | D) | both b and c |
| | E) | all of the above |
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| 20 | |
Economies of scale exist when… |
| | A) | fixed cost decreases as output increases. |
| | B) | long-run average cost decreases as output increases. |
| | C) | long-run marginal cost is greater than long-run average cost. |
| | D) | both a and b |
| | E) | both b and c |
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