Question 1

In microeconomic theory, the 'short run' is best defined as:

Accepted Answer

a time period in which at least one input is fixed.

Question 2

A firm produces autos following the production function $$q = F(L,K) = 5KL. If$$ $$K = 10$$ robots and $$L = 10$$ workers, what is the maximum number of autos that can be produced?

Accepted Answer

500

Question 3

Suppose the production function is $$F(L,K) = 10K$$^{0.5}$$L^{0.5}. If$$ $$K = 1$, what is the expression for the average product of labor?

Accepted Answer

$$AP = 10L$$^{0.5}$$/L = 10L$$^{-0.5}$$

Question 4

For the production function $$F(L,K) = 10K$$^{0.5}$$L^{0.5}$$ with $$K = 1$, what is the marginal product of labor?

Accepted Answer

$$MP = 5L$$^{-0.5}$$

Question 5

Which of the following is NOT a correct definition/description of the marginal rate of technical substitution (MRTS)?

Accepted Answer

The ratio of the prices of the inputs.

Question 6

Suppose a production function has $$MRTS = \frac{K}{2L}$$ with $$L = 100$$ and $$K = 400. $$How much capital can be reduced if labor increases by 1 unit to maintain the same output level?

Accepted Answer

2

Question 7

Consider a production function $$F(L,K) = AL^aK^b. $$The function exhibits increasing returns to scale if:

Accepted Answer

$$a + b \u003e 1$$

Question 8

A firm's total cost function is $$C(q) = 4000 + 5q + 10q^2$. What is the marginal cost?

Accepted Answer

$$MC = 5 + 20q$$

Question 9

For the production function $$F(L,K) = 4LK$$ with $$K = 12$$, what is the amount of labor necessary to produce $$q$$ units of output?

Accepted Answer

$$L(q) = \frac{q}{48}$$

Question 10

Suppose isoquants are right angles and the kinks are on the $$K = 2L$$ line. The expansion path will:

Accepted Answer

follow $$K = 2L$$

Question 11

A firm uses labor (L) and capital (K) to produce outputs. The isoquant curves are L-shaped. If the wage rate is $$200$$ and the rental rate of capital is $$100$$, what is the cost of producing 20 units of output when both inputs are variable?

Accepted Answer

800

Question 12

Suppose a firm's cost function is $$C(q) = 1 + 3q^2$. What is the expression for the firm's profit function in a perfectly competitive market?

Accepted Answer

$$Profit(q) = pq - 1 - 3q^2$

Question 13

At the profit-maximizing level of output $$q \u003e 0$$, which statement is wrong?

Accepted Answer

Marginal profit is maximized.

Question 14

The demand curve facing a perfectly competitive firm is:

Accepted Answer

perfectly horizontal.

Question 15

Bette's Breakfast sells its 'Breakfast Special' for $$5.00. The average variable cost is 3.95$ per meal; the average fixed cost is 1.25$ per meal. What should Bette do?

Accepted Answer

Continue producing in the short run, but plan to go out of business in the long run.

Question 16

If the output price is equal to $$16$$, then the firm's maximal profits is:

Accepted Answer

-$1800

Question 17

If the output price is equal to $$30$$, then the firm's maximal profits is:

Accepted Answer

$0

Question 18

Ronny's Pizza House operates in a perfectly competitive market. If the price of cheese increases, what is the expected impact on Ronny's profit-maximizing output decision?

Accepted Answer

Output decreases because the marginal cost curve shifts upward.

Microeconomics Homework 3 Study Guidance: Production Functions, Returns to Scale, Cost Minimization

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