1. Suppose the short-run production function i

04 Jun 1. Suppose the short-run production function i

Question
1. Suppose the short-run production function is Q = L0.5. If the marginal cost of producing the tenth unit is $5, what is the wage per unit of labor?

A. $1

B. 5¢

C. 25¢

D. $100 E. $31.62

2. If the average total cost of producing a good is increasing as a firm produces more of the good, then which of the following must be TRUE?

A. AFC is falling.

B. AVC is rising.

C. MC>AVC.

D. All of the above.

E. Noneoftheabove.

3. Which of the following relationships is NOT valid?

A. Rising marginal cost implies that average total cost is also rising.

B. When marginal cost is below average total cost, average total cost is falling.

C. When marginal cost is above average variable cost, average variable cost is rising.

D. Average total cost must be greater than average fixed cost.

E. None of the above

4. Consider the following statements when answering this question;

I. A firm’s marginal cost curve does not depend on the level of fixed costs.

II. As output increases the difference between a firm’s average total cost and average variable

cost curves cannot rise.

A. I is true, and II is false.

B. I is false, and II is true.

C. I and II are both true.

D. I and II are both false.

5. Consider the following statements when answering this question:

I. If a firm employs only one variable factor of production, labor, and the marginal product of

labor is constant, then the marginal cost of production is constant too.

II. If a firm employs only one variable factor of production, labor, and the marginal product of

labor is constant, then short-run average total costs cannot fall as output rises.

A. I is true, and II is false.

B. I is false, and II is true.

C. I and II are both true.

D. I and II are both false.

6. Consider a production function of two inputs, labor and capital, given by Q = L1/2 + K1/2. Let

w = 2 and r = 1. In the short run, capital is fixed at 9 units. Which equation represents the short run marginal cost function?

A. MC=2L

B. MC=4Q–12

C. MC=2Q

D. MC=4

E. MC = 2Q + 3

7. Refer to above figure. At point C

A. the marginal product of labor is greater than the average product of labor.

B. the average product of labor is greater than the marginal product of labor.

C. the marginal product of labor and the average product of labor are equal.

D. the marginal product of labor and the average product of labor are both increasing.

E. Both B and D are correct.

?

8. Which statement is false?

A. If MC is increasing, average variable cost could be increasing or decreasing.

B. If MPL is decreasing but positive as more labor is used, variable cost must be increasing at an

increasing rate.

C. If a firm employs only one variable factor of production, labor, and the marginal product of

labor is constant, then short-run average total costs cannot rise as output rises.

D. If MC is decreasing then TP is increasing at a decreasing rate.

E. When TP is decreasing, MPL is negative.

9. Consider the following statements when answering this question:

I. If the marginal product of labor always falls whenever more labor is used, and labor is the

only variable factor of production used by the firm, then at every output level the firm’s

short-run average variable cost exceeds marginal cost.

II. If a firm employs only one variable factor of production, labor, and the production function is

given by an upward sloping line that starts at the origin, then the marginal cost always equals

the average total cost as output expands.

A. I is true, and II is false.

B. I is false, and II is true.

C. I and II are both true.

D. I and II are both false.

10. Suppose you observe that MPL > APL and MPL is decreasing but positive as more labor is used. Based on this, you can say that TP is ______ at______ rate, and APL must be ______.

A. increasing; a decreasing; increasing

B. increasing; a decreasing; decreasing

C. increasing; an increasing; decreasing

D. decreasing; a decreasing; decreasing

E. decreasing; increasing; increasing

Long Form Questions