# Quiz 10: Production and Cost Estimation

Business

Q 1Q 1

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

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Multiple Choice

A

Q 2Q 2

Which of the following is an estimable form of a production function?
A) Q = f(L,K)
B) Q = f(L )
C)
D) all of the above
E) none of the above

Free

Multiple Choice

C

Q 3Q 3

Which of the following represents a short-run cubic production function?
A)
B)
C)
D)
E) all of the above

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Multiple Choice

C

Q 4Q 4

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

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Multiple Choice

Q 5Q 5

a cubic production function of the form , 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

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Multiple Choice

Q 6Q 6

estimating a short-run production function of the form , 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

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Multiple Choice

Q 7Q 7

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

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Multiple Choice

Q 8Q 8

average variable cost function is estimated as Which of the following cost functions is associated with this estimate?
A) SMC = 96 - 4Q + 0.1Q

^{2}B) TVC = 96Q - 2Q^{2}+ 0.05Q^{3}C) TVC = 96Q + 4Q^{2}+ 0.15Q^{3}D) SMC = 96 - 4Q + 0.15Q^{2}E) both b and dFree

Multiple Choice

Q 9Q 9

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

^{2}, 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 < 0Free

Multiple Choice

Q 10Q 10

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At what level of labor usage does the maximum average product occur?
A) 20
B) 30
C) 40
D) 50
E) 60

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Multiple Choice

Q 11Q 11

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-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

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Multiple Choice

Q 12Q 12

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-What is total product when average product is at its maximum level?
A) 94
B) 86
C) 100
D) 128
E) 150

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Multiple Choice

Q 13Q 13

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At 20 units of labor, what is average product?
A) 6.0
B) 1.9
C) 6.3
D) 4.0
E) 2.4

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Multiple Choice

Q 14Q 14

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At 20 units of labor, what is marginal product?
A) 6.0
B) 1.9
C) 6.3
D) 4.0
E) 2.4

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Multiple Choice

Q 15Q 15

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At 20 units of labor, what is total product?
A) 48
B) 96
C) 20
D) 62
E) 41

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Multiple Choice

Q 16Q 16

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At 60 units of labor, what is average product?
A) 9.4
B) 8.6
C) 3.7
D) 2.4
E) 6.4

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Multiple Choice

Q 17Q 17

Questions 10 through 17 refer to the following:
A short-run production function was estimated as
-At 60 units of labor, what is marginal product?
A) 4.1
B) 1.2
C) 6.3
D) 2.4
E) 2.4

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Multiple Choice

Q 18Q 18

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

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Multiple Choice

Q 19Q 19

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

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Multiple Choice

Q 20Q 20

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

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Multiple Choice

Q 21Q 21

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-The estimated short-run marginal cost function (SMC) at Straker Industries is:
A)
B)
C)
D)

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Multiple Choice

Q 22Q 22

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

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Multiple Choice

Q 23Q 23

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-At Straker Industries, average variable cost (AVC) reaches its minimum value at $________.
A) $24.50
B) $33.60
C) $72.80
D) $121.80

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Multiple Choice

Q 24Q 24

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

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Multiple Choice

Q 25Q 25

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 26Q 26

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 27Q 27

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 28Q 28

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 29Q 29

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 30Q 30

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 31Q 31

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 32Q 32

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 33Q 33

Questions 21 through 33 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
and obtained the following results. Total fixed cost (TFC) at Straker Industries is $1,000.
-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

Free

Multiple Choice

Q 34Q 34

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

^{2}, A) the AVC curve is -shaped when a < 0, b > 0, and c < 0. B) the AVC curve is -shaped when a > 0, b < 0, and c > 0. C) the corresponding SMC function is . D) both a and c E) all of the aboveFree

Multiple Choice

Q 35Q 35

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.

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Multiple Choice

Q 36Q 36

When estimating a cubic short-run production function using linear regression analysis, you must
A) transform the equation into linear form by defining L3 and L2 as L

^{3}and L^{2}, respectively. B) suppress the intercept term (regress through the origin). C) convert to logarithms. D) both a and b E) both b and cFree

Multiple Choice

Q 37Q 37

The empirical specification 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

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Multiple Choice

Q 38Q 38

The empirical specification 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

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Multiple Choice

Q 39Q 39

Questions 39 through 43 refer to the following:
A firm estimates its long-run production function to be
Suppose the firm employs 12 units of capital.
-The product curve(s) in the short-run are
A) TP = -12.96 L

^{3}+ 1,728L^{2}. B) AP = -12.96 L^{3}+ 1,728L^{2}. C) MP = -38.88 L^{2}+ 3,456L. D) both a and b E) both a and cFree

Multiple Choice

Q 40Q 40

Questions 39 through 43 refer to the following:
A firm estimates its long-run production function to be
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

Free

Multiple Choice

Q 41Q 41

Questions 39 through 43 refer to the following:
A firm estimates its long-run production function to be
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

Free

Multiple Choice

Q 42Q 42

Questions 39 through 43 refer to the following:
A firm estimates its long-run production function to be
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

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Multiple Choice

Q 43Q 43

Questions 39 through 43 refer to the following:
A firm estimates its long-run production function to be
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

Free

Multiple Choice

Q 44Q 44

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 45Q 45

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

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Multiple Choice

Q 46Q 46

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

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Multiple Choice

Q 47Q 47

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 48Q 48

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 49Q 49

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 50Q 50

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

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Multiple Choice

Q 51Q 51

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 52Q 52

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
Greene Enterprises faces total fixed costs (TFC) of $300,000.
-When Greene's output is 2,000 units, average variable cost (AVC) is
F) rising
G) falling h. greater than short-run marginal cost
I) less than short-run marginal cost
J) both b and c

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Multiple Choice

Q 53Q 53

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

Free

Multiple Choice

Q 54Q 54

Questions 44 through 54 refer to Greene Enterprises, Inc., whose manager recently estimated its average variable cost (AVC) function to be
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

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Multiple Choice

Q 55Q 55

A short-run marginal cost function is estimated as . Which of the following cost functions is associated with this estimated SMC equation?
A) TVC = 96Q - 2Q

^{2}+ 0.05Q^{3}B) SMC = 96 - 4Q + 0.1Q^{2}C) TVC = 96Q + 4Q^{2}+ 0.15Q^{3}D) AVC = 96 - 2Q + 0.05Q^{2}E) a and dFree

Multiple Choice