# Quiz 6: Producer Behavior

Business

Q 1Q 1

Capital cannot be adjusted in the short run because:
A) there is not sufficient time to adjust it.
B) it is too expensive to alter the capital stock.
C) capital markets do not function well enough in the short run.
D) the firm has yet to decide what product to produce, so it does not yet know what kind of capital it needs.

Free

Multiple Choice

A

Q 2Q 2

(Figure: Production Function I) Which of the following statements is (are) TRUE? I. At L = 5, MPT

_{L}> AP_{L}. II) At L = 2, MP_{L}= AP_{L}. III) For this production function, MP_{L}is greater at L = 2 than at L = 8. IV) For this production function, MP_{L}is always greater than AP_{L}. A) I and II B) III C) I and IV D) IIFree

Multiple Choice

B

Q 3Q 3

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The total output with two units of labor is ____.
A) 80
B) 40
C) 30
D) 20

Free

Multiple Choice

A

Q 4Q 4

(Figure: Capital and Labor VI) Suppose a firm spends $4,000 per day producing a good. The wage rate per worker is $200 per day and rental rate per unit of capital is $500 per day. The firm's isocost line at the current expenditure level is represented by:
A) C

_{1}. B) C_{2}. C) C_{3}. D) C_{4}.Free

Multiple Choice

Q 5Q 5

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. The function for the marginal rate of technical substitution is ____. A) 2.4K^{0.4}L^{-0.4}B) 1.6K^{-0.6}L0^{.6}C) KL D) (3/2)KL^{-1}Free

Multiple Choice

Q 6Q 6

For the production function Q(K,L) = 3K + 2L, the marginal rate of technical substitution MRTS

_{LK}is: A) 2/3. B) 3/2. C) 2L/3K. D) 3K/2L.Free

Multiple Choice

Q 7Q 7

Suppose the production function for a car manufacturer is:
Q = 2K

^{2}L^{2}Where Q is the number of cars produced, K is the number of machine hours used, and L is the number of worker hours used. The function for the marginal rate of technical substitution is ____. A) 4K^{2}L B) 4KL^{2}C) 4KL D) KL^{-1}Free

Multiple Choice

Q 8Q 8

(Table: Capital and Labor XIV) Consider the production function that this table shows. With 4 units of labor and 2 units of capital, the level of output is ____.
A) 263.9
B) 246.23
C) 219.46
D) 186.61

Free

Multiple Choice

Q 9Q 9

Suppose the production function for a car manufacturer is:
Q = 2K

^{2}L^{2}Where Q is the number of cars produced, K is the number of machine hours used, and L is the number of worker hours used. The function for the marginal product of labor is ____. A) 4K^{2}L B) 4KL^{2}C) 4KL D) KL^{-1}Free

Multiple Choice

Q 10Q 10

(Table: Capital and Labor XIV) Consider the production function that this table shows. Suppose the firm is using 3 units of capital and 2 units of labor and then decides to employ a third worker. The marginal product of the third worker is ____.
A) 49.33
B) 40.24
C) 31.78
D) 26.79

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Multiple Choice

Q 11Q 11

(Table: Capital and Labor XIV) Consider the production function that this table shows. Suppose the firm is using 2 units of capital and 1 unit of labor. The marginal product of capital for K = 3 is ____.
A) 41.42
B) 40.24
C) 31.78
D) 26.79

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Multiple Choice

Q 12Q 12

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The marginal product of labor with one unit of labor is ____.
A) 50
B) 40
C) 30
D) 20

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Multiple Choice

Q 13Q 13

Suppose that a community health center finds that, regardless of the number of physicians or nurse practitioners employed, it can always replace one family practice physician by using two additional nurse practitioners without affecting the quantity or quality of patient office visits. This finding implies that:
A) physicians and nurse practitioners are perfect substitutes in production.
B) physicians and nurse practitioners are perfect complements in production.
C) diminishing returns will occur as the health center hires more nurse practitioners.
D) the marginal product of physicians will increase by two with every nurse practitioner hired.

Free

Multiple Choice

Q 14Q 14

Suppose a firm is producing 2,475 units of output by hiring 50 workers (W = $20 per hour) and 25 units of capital (R = $10 per hour). The marginal product of labor and marginal product of capital are 40 and 25, respectively. Is the firm minimizing the cost of producing 2,475 units of output?
A) Yes, the ratio of the number of workers to the wage equals the ratio of the number of units of capital to the rental rate.
B) No, the firm should use more labor and less capital.
C) No, the firm should use more capital and less labor.
D) No, the firm should use more of both labor and capital.

Free

Multiple Choice

Q 15Q 15

(Figure: Capital and Labor XII) Which of the following statements is (are) TRUE?
I) Panel a illustrates constant returns to scale.
II) Panel b illustrates decreasing returns to scale.
III) Panel a illustrates increasing returns to scale
IV) Panel b illustrates constant returns to scale.
A) I and IV
B) II and III
C) III and IV
D) I and III

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Multiple Choice

Q 16Q 16

(Figure: Capital and Labor XVI) Consider the production function Q = L

^{0.5}K^{0.5}, with MP_{K}= L^{0.5}/K^{0.5}and MP_{L}= K^{0.5}/L^{0.5}. The slope of the isoquant at Point A is ____. A) -81 B) 81 C) -9 D) 9Free

Multiple Choice

Q 17Q 17

Which of the following statements is (are) TRUE?
I) If labor and capital are perfect substitutes in production, the isoquant is a downward-sloping line.
II) If a company needs to use inputs in fixed proportion such that the capital to labor ratio is always 2, the firm's isoquants are L-shaped.
III) If the production function is given by Q = min(14, 7), the firm can produce, at minimum, 21 units of output.
A) I, II, and III
B) I
C) II
D) I and II

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Multiple Choice

Q 18Q 18

(Table: Capital and Labor II) Which of the following statements is (are) TRUE? I. A combination of 4 units of capital and 2 units of labor produces the same amount of output as a combination of 3 units of capital and 3 units of labor.
II) If labor is fixed at 3 units, adding more capital increases output at an increasing rate.
III) If capital is fixed at 2 units, adding more labor results in diminishing returns.
IV) A combination of 3 units of capital and 4 units of labor produces 171.4 units of output.
A) I, II, III, and IV
B) II, III, and IV
C) III and IV
D) IV

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Multiple Choice

Q 19Q 19

Suppose the production function for a coffee shop is:
Q = 2K + 5L
Where Q is the number of cups of coffee produced, K is the number of coffee makers, and L is the number of workers. The function for the marginal product of labor is ____.
A) 5
B) 2.5
C) 2
D) 0.4

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Multiple Choice

Q 20Q 20

(Table: Capital and Labor XIV) Consider the production function that this table shows. Suppose the firm is using 3 units of capital and 1 unit of labor. The marginal product of capital for K = 4 is ____.
A) 41.42
B) 40.24
C) 31.78
D) 26.79

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Multiple Choice

Q 21Q 21

(Figure: Capital and Labor IX) The movement in the isocost line is caused by a(n):
A) decrease in the wage rate.
B) increase in the wage rate or rental rate of capital.
C) increase in the wage rate.
D) decrease in the rental rate of capital.

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Multiple Choice

Q 22Q 22

Suppose the firm's production function is Q = K

^{1/3}L^{2/3}, where the MPK = and MP_{L}= ) If the rental rate of capital R is $35 and the wage rate W is $70, how many units of labor and capital should the firm use to produce 12 units of output? A) L = 18; K = 9 B) L = 9; K = 18 C) L = 12; K = 12 D) L = 24; K = 24Free

Multiple Choice

Q 23Q 23

(Figure: Capital and Labor XVI) Consider the production function Q = L

^{0.5}K^{0.5}, with MP_{K}= L^{0.5}/K^{0.5}and MP_{L}= K^{0.5}/L^{0.5}. When K = 5 and L = 10, the marginal rate of technical substitution is ____. A) 2 B) 1 C) 0.5 D) 0.25Free

Multiple Choice

Q 24Q 24

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The average product of labor with one unit of labor is ____.
A) 50
B) 40
C) 30
D) 20

Free

Multiple Choice

Q 25Q 25

(Figure: Capital and Labor XVI) Consider the production function Q = L

^{0.5}K^{0.5}, with MP_{K}= L^{0.5}/K^{0.5}and MP_{L}= K^{0.5}/L^{0.5}. The slope of the isoquant at Point B is ____. A) -9 B) 9 C) -1 D) 1Free

Multiple Choice

Q 26Q 26

In the long run, because firms can adjust both capital and labor:
A) firms will grow.
B) production is more expensive because firms must invest in both labor and capital.
C) the impact of diminishing marginal returns is lessened.
D) firms fire workers, replacing the labor productivity with capital.

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Multiple Choice

Q 27Q 27

Suppose the production function for a coffee shop is:
Q = 2K + 5L
Where Q is the number of cups of coffee produced, K is the number of coffee makers, and L is the number of workers. The function for the marginal product of capital is ____.
A) 5
B) 2.5
C) 2
D) 0.4

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Multiple Choice

Q 28Q 28

(Figure: Capital and Labor XI) Which of the following statements is (are) TRUE? I. If labor is cheaper than capital, the firm will produce at point B.
II) If capital is more expensive than labor, the firm will produce at point A.
III) At point A, the MRTS

_{LK}= W/R. A) II and III B) III C) I and III D) I and IIFree

Multiple Choice

Q 29Q 29

Suppose that a farmer grows corn. The farmer's production function is Q(K,L) = 5K

^{0.4}L^{0.6}, where K is the number of harvesters and L is the number of farmworker labor hours. The prevailing wage rate is $8 per hour and the rental rate associated with harvesters is $75. The farmer has a goal of delivering 100,000 bushels of corn to market. What Lagrangian equation can be used to solve the farmer's cost minimization problem? A) B) C) D)Free

Multiple Choice

Q 30Q 30

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. The average product of labor for L = 9 is ____. A) 28.28 B) 11.71 C) 9.43 D) 7.07Free

Multiple Choice

Q 31Q 31

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The average product of labor when there are three units of labor is ____.
A) 50
B) 40
C) 33.33
D) 30

Free

Multiple Choice

Q 32Q 32

For the production function Q(K,L) = K

^{0.5}L^{0.5}, the marginal rate of technical substitution MRTS_{LK}is: A) 0.25K/L. B) 0.25L/K. C) K/L. D) L/K.Free

Multiple Choice

Q 33Q 33

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The marginal product of labor of the second unit of labor is ____.
A) 50
B) 40
C) 30
D) 20

Free

Multiple Choice

Q 34Q 34

Suppose that a firm's production function is given by Q = 1.23KL (MP

_{K}= 1.23L and MP_{L}= 1.23K), where Q is quantity of output, K is units of capital, and L is units of labor. The price per unit of labor and capital are $30 and $20, respectively. The minimum cost of producing 600 units of output is $____. A) 2,160 B) 1,080 C) 960 D) 580Free

Multiple Choice

Q 35Q 35

In the short run, the marginal product of labor:
A) is always diminishing.
B) will eventually fall.
C) continues to increase as long as the firm adds labor slowly.
D) always increases because laborers become more efficient with experience.

Free

Multiple Choice

Q 36Q 36

Suppose that a firm's production function is . The marginal rate of technical substitution is ____.
A) 0.5KL
B) KL
C) 2KL

^{-1}D) 0.5KL^{-1}Free

Multiple Choice

Q 37Q 37

(Figure: Capital and Labor VIII) The movement in the isocost line is caused by a(n):
A) increase in the rental rate of capital.
B) decrease in the rental rate of capital.
C) decrease in the wage rate.
D) increase in the wage rate.

Free

Multiple Choice

Q 38Q 38

(Figure: Production Function I) The average product at L = 2 and L = 8, respectively, are:
A) 2 and 1.13.
B) 2 and 0.89.
C) 8 and 72.
D) 1.5 and 1.13.

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Multiple Choice

Q 39Q 39

If a firm is using a lot of capital and just a little labor, the marginal product of labor is_____ relative to the marginal product of capital making it _____ to substitute labor for capital.
A) low; more difficult
B) high; easier
C) high; more difficult
D) low; easier

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Multiple Choice

Q 40Q 40

For the production function Q(K,L) = 3K + 2L, the marginal product of labor is:
A) 2.
B) 3.
C) 2L.
D) 3K.

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Multiple Choice

Q 41Q 41

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. The average product of labor for L = 16 is ____. A) 40 B) 13.33 C) 9.43 D) 7.07Free

Multiple Choice

Q 42Q 42

(Table: Capital and Labor I) Which of the following statements is (are) TRUE?
A) At L = 1, marginal product is greater than average product.
B) At L = 3, the quantity of output produced per unit of labor is 82.2.
C) The additional output produced by using the second unit of labor is 86.6.
D) At L = 2, the AP

_{L}= L/Q = 186.6.Free

Multiple Choice

Q 43Q 43

Suppose a firm's short-run production function is given by Q = 16L

^{0.8}. What is the marginal product of the fourth worker? A) 36 B) 10 C) 49 D) 1.85Free

Multiple Choice

Q 44Q 44

Brenda's Pastry employs three workers who produce 6 dozen pastries per hour. After Brenda hires a fourth worker, the number of pastries produced increases to 7 dozen per hour. Because the marginal product of the fourth worker is _____ than the average product of three workers, the average product must _____.
A) greater; fall
B) less; rise
C) greater; rise
D) less; fall

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Multiple Choice

Q 45Q 45

Which of the following is a Cobb-Douglas production function?
A) Q = f(K, L)
B) Q = 5K + 2.5L
C) Q = K

^{0.}^{5}^{0}L^{0.75}D) Q = 2K/3LFree

Multiple Choice

Q 46Q 46

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The average product of labor when there are four units of labor is ____.
A) 50
B) 40
C) 33.33
D) 27.5

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Multiple Choice

Q 47Q 47

To calculate the firm's expansion path using calculus, we need to solve its:
A) quantity maximization problem.
B) cost minimization problem, with rental cost of capital R and wage W treated as variables.
C) cost minimization problem with quantity Q fixed.
D) cost minimization problem with quantity Q treated as variable.

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Multiple Choice

Q 48Q 48

Which situation will likely give rise to diminishing marginal product of labor?
A) Plasma television manufacturers are going out of business because of increased competition from LCD televisions.
B) Hell's Kitchen, which has enough counter space for three cooks per shift, decides to hire a fourth cook per shift.
C) Nevaeh's Kitchen undertakes a massive expansion, doubling both the size of its kitchen and number of cooks.
D) A landscaping firm replaces all of its self-propelled lawnmowers with push mowers.

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Multiple Choice

Q 49Q 49

(Table: Capital and Labor II) This table illustrates a _____ production function because capital and labor _____.
A) short-run; are used in equal increments
B) long-run; can both be varied
C) long-run; are used in equal increments
D) short-run; can both be varied

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Multiple Choice

Q 50Q 50

(Table: Production Process I) Diminishing marginal returns to labor occur in production process _____, and diminishing marginal returns to capital occur in production process _____.
A) 1; 3
B) 2; 1
C) 2; 3
D) 1; 1

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Multiple Choice

Q 51Q 51

Suppose a firm with a production function given by Q = 4K

^{0.25}L^{0.75}produces 100 units of output. The firm pays a wage of $30 per units and pays a rental rate of capital of $10 per unit. (Note: ) The minimum cost of producing 100 units of output is: A) $3,000. B) $2,250. C) $800. D) $1,000.Free

Multiple Choice

Q 52Q 52

Between 1994 and 2008, the share of the workforce employed in manufacturing _____ and manufacturing output _____.
A) decreased; decreased
B) increased; increased
C) decreased; increased
D) increased; decreased

Free

Multiple Choice

Q 53Q 53

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. The marginal product of labor for L = 2 is ____. A) 28.28 B) 11.71 C) 9.43 D) 8.99Free

Multiple Choice

Q 54Q 54

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. The marginal product of labor for L = 1, assuming that labor is infinitely divisible, is ____. A) 1 B) 0.705 C) 0.577 D) 0.5Free

Multiple Choice

Q 55Q 55

Production is an extremely complicated task, so economists make a number of simplifying assumptions. Which of the following assumptions do economists make in their basic model of producer behavior?
I) Multiproduct firms: All firms produce at least two goods.
II) Firms only use two inputs in the production process: capital and labor.
III) Cost minimization: Firms attempt to produce a fixed quantity of output at the lowest possible total cost.
IV) Firms can produce more output by using more inputs.
A) I and IV
B) I, II, III, and IV
C) II, III, and IV
D) I and III

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Multiple Choice

Q 56Q 56

Which of the following statements is (are) TRUE, assuming the firm is choosing the optimal bundle of inputs that minimizes the cost of producing a given quantity of output?
I) The marginal product per dollar spent on labor equals the marginal product per dollar spent on capital.
II) AP

_{L}= APK III) IV) MP_{L}× W = MP_{K}× R A) I and II B) I, II, III, and IV C) IV D) I and IIIFree

Multiple Choice

Q 57Q 57

Suppose that a hot dog vendor uses a cart (K) and his time (L) to make and sell hot dogs. The vendor's production function is , where Q is the number of hot dogs per day. Suppose that the rental on hot dog carts is $50 per day and that the vendor wants to produce 500 hot dogs per day. The demand for labor is ____.
A) L = 1,020.4W

^{-0.3}B) L = 1,020.4W^{-0.7}C) W = 1,020.4L^{-0.3}D) L = 1,020.4W^{0.3}Free

Multiple Choice

Q 58Q 58

The production function given by Q = 10(0.7K

^{2}+ 0.3L^{2})^{0.5}has _____ returns to scale. A) constant B) instant C) increasing D) decreasingFree

Multiple Choice

Q 59Q 59

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. The average product of labor for L = 2 is ____. A) 1 B) 0.705 C) 0.577 D) 0.5Free

Multiple Choice

Q 60Q 60

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. The function for the marginal product of capital is ____. A) 2.4K^{0.4}L^{-0.4}B) 1.6K^{-0.6}L0^{.6}C) KL D) (3/2)KL^{-1}Free

Multiple Choice

Q 61Q 61

(Figure: Capital and Labor V) Put these four panels in order from the easiest case of input substitutability to the hardest case of input substitutability.
A) b, a, c, d
B) a, c, d, b
C) d, c, a, b
D) a, d, c, b

Free

Multiple Choice

Q 62Q 62

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Suppose that the wage rate is $5 per hour and the rental rate of capital is $10 per hour. The firm's expansion path is ____. A) K = 0.5L B) K = L C) K = 2L D) K = L^{2}Free

Multiple Choice

Q 63Q 63

Which of the following statements best exemplifies the firm's constrained minimization problem?
A) The firm desires to produce a given quantity of output by choosing values of W and R that minimize RK + WL.
B) The firm desires to minimize output subject to the constraint that C = RK + WL.
C) The firm desires to produce as much output as possible by choosing values of L and K that minimize RK + WL.
D) The firm desires to produce a given quantity of output by choosing values of L and K that minimize RK + WL.

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Multiple Choice

Q 64Q 64

Suppose that a firm's production function is given by Q = KL (MP

_{K}= L and MP_{L}= K), where Q is quantity of output, K is units of capital, and L is units of labor. The price per unit of labor and capital are $30 and $20, respectively. How many units of labor and capital should the firm use if it wants to minimize the cost of producing 600 units of output? A) L = 20; K = 30 B) L = 30; K = 20 C) L = 40; K = 60 D) L = 25; K = 25Free

Multiple Choice

Q 65Q 65

Suppose the production function for a car manufacturer is:
Q = 2K

^{2}L^{2}Where Q is the number of cars produced, K is the number of machine hours used, and L is the number of worker hours used. The function for the marginal product of capital is ____. A) 4K^{2}L B) 4KL^{2}C) 4KL D) KL^{-1}Free

Multiple Choice

Q 66Q 66

A basic assumption of the long run is that a firm:
A) cannot change the amount of labor or capital that it employs.
B) can change the amount of labor and capital that it employs.
C) can change the amount of capital that it employs but not the amount of labor.
D) cannot change the amount of capital that it employs but can change the amount of labor.

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Multiple Choice

Q 67Q 67

MRTS

_{LK}decreases as the firm substitutes labor for capital along the isoquant for all production functions below EXCEPT: A) . B) . C) . D) .Free

Multiple Choice

Q 68Q 68

(Figure: Capital and Labor X) Which of the following statements is (are) TRUE? I. The firm minimizes the cost of producing 10,000 units of output at point C.
II) If the firm chooses an input combination that lies on C

_{3}, the firm will be able to produce 10,000 units of output at a lower cost than at point A. III) The cost of producing 10,000 units of output is greater at point B than at point A. A) I and III B) II and III C) I D) I, II, and IIIFree

Multiple Choice

Q 69Q 69

Which of the following statements violates the basic assumptions of isoquants?
A) Isoquants cannot cross.
B) Isoquants closer to the origin correspond to lower output levels.
C) Diminishing marginal products imply that isoquants are concave to the origin.
D) Isoquants show all combinations of two inputs that can produce a particular quantity of output.

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Multiple Choice

Q 70Q 70

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. The function for the marginal product of labor is ____. A) 2.4K^{0.4}L^{-0.4}B) 1.6K^{-0.6}L0^{.6}C) KL D) (3/2)KL^{-1}Free

Multiple Choice

Q 71Q 71

Which of the following is (are) example(s) of production functions?
I) Q = 56K + 18L
II) Q = 2K

^{0.8}L^{0.2}III) Q = KL A) II and III B) I, II, and III C) II D) IFree

Multiple Choice

Q 72Q 72

(Figure: Production Function II) Which of the following statements are TRUE? I. This production function exhibits diminishing marginal product.
II) At L = 3, MP

_{L}= 1.88 and AP_{L}= 4. III) At L = 6, AP_{L}> MP_{L}. IV) At L = 3, MP_{L}= 4 and AP_{L}= 1.88. A) II and III B) I, II, and III C) I, III, and IV D) I and IIFree

Multiple Choice

Q 73Q 73

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The total output when there are four units of labor is ____.
A) 120
B) 110
C) 100
D) 90

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Multiple Choice

Q 74Q 74

(Figure: Capital and Labor IV) Which of the following statements is (are) TRUE? I. More output is produced at point A than at point B.
II) The ratio of the marginal product of labor to the marginal product of capital is higher at point A than at point B.
III) The MRTS

_{LK}is equal at points A and B. A) I, II, and III B) II C) III D) II and IIIFree

Multiple Choice

Q 75Q 75

Why are the slopes of isocost lines constant?
A) Firms must use capital and labor inputs in fixed proportions.
B) Firms can hire as much of an input as they desire without changing wages or rental rates.
C) Firms must use less labor if employing more capital.
D) The marginal rate of technical substitution of labor for capital is constant.

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Multiple Choice

Q 76Q 76

A donut shop has a production function given by Q = 50K

^{1/3}L^{1/2}, where Q is the number of donuts produced per hour, K is the number of donut fryers (which is fixed at eight in the short run), and L is the number of employed workers. How many donuts can be produced per hour with four workers in the short run? A) 200 B) 167 C) 320 D) 84Free

Multiple Choice

Q 77Q 77

A basic assumption of the short run is that a firm:
A) can employ more workers and add more capital to the production process.
B) cannot adjust its workforce or the amount of capital it uses.
C) can reduce the number of workers it uses, but it cannot adjust how much capital it uses.
D) can freely adjust the amount of labor and capital that it employs.

Free

Multiple Choice

Q 78Q 78

Suppose the slope of a short-run production function is given by 2/L

^{0.5}. Which of the following statements is (are) TRUE? I) The marginal product of the fifth worker is 0.20. II) The production function exhibits increasing marginal returns. III) The marginal product of the sixteenth worker is 0.50. IV) The production function's slope eventually changes from positive to negative as the firm produces more and more. A) II and III B) I and IV C) III D) I, II, and IVFree

Multiple Choice

Q 79Q 79

Using a Lagrangian equation for a firm's cost minimization problem, you can solve for all of the following EXCEPT:
A) the optimal level of labor input.
B) the average cost of production.
C) the demand function for capital.
D) the equation for the expansion path.

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Multiple Choice

Q 80Q 80

Solving for the value of the Lagrange multiplier in the firm's cost minimization problem tells us:
A) average cost.
B) total cost.
C) marginal cost.
D) variable cost.

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Multiple Choice

Q 81Q 81

Suppose a firm with a production function given by Q = K

^{0.25}L^{0.75}produces 1,500 units of output. The firm pays a wage of $50 per unit and pays a rental rate of capital of $50 per unit. (Note: ) To minimize the cost of producing 1,500 units of output, the firm should use: A) 3 times as many units of labor as units of capital. B) equal amounts of labor and capital. C) 1.25 times as many units of capital as units of labor. D) 16 units of capital and 6,814 units of labor.Free

Multiple Choice

Q 82Q 82

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. The average product of labor for L = 1 is ____. A) 1 B) 0.705 C) 0.577 D) 0.5Free

Multiple Choice

Q 83Q 83

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. The marginal product of labor for L = 3 is ____. A) 28.28 B) 11.71 C) 9.43 D) 8.99Free

Multiple Choice

Q 84Q 84

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}Where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Suppose that the wage rate is $5 per hour, the rental rate of capital is $10 per hour, and the baker wants to produce 4,000 loaves of bread. The firm's demand for labor is ____. A) L = 2.95W^{-0.4}B) L = 2.95W^{-0.6}C) W = 2.95L^{-0.4}D) L = 2.95WFree

Multiple Choice

Q 85Q 85

The short-run production function for a firm is given by Q = 40L

^{2/3}. What is the average product? A) AP_{L}= 16.67L B) AP_{L}= 40/L C) AP_{L}= 40/L^{1/3}D) AP_{L}= 1/40LFree

Multiple Choice

Q 86Q 86

(Table: Capital and Labor XIV) Consider the production function that this table shows. Suppose the firm is using 1 unit of capital and 1 unit of labor. The marginal product of capital for K = 2 is ____.
A) 41.42
B) 40.24
C) 31.78
D) 26.79

Free

Multiple Choice

Q 87Q 87

Suppose the production function for a coffee shop is:
Q = 2K + 5L
Where Q is the number of cups of coffee produced, K is the number of coffee makers, and L is the number of workers. The function for the marginal rate of technical substitution is ____.
A) 5
B) 2.5
C) 2
D) 0.4

Free

Multiple Choice

Q 88Q 88

Suppose the firm's production function is Q = K

^{1/3}L^{2/3}, where the MPK = and MP_{L}= ) If the rental rate of capital R is $30 and the wage rate W is $40, then the cost-minimizing capital-to-labor ratio is K/L = ____. A) 3/2 B) 1 C) 2/3 D) 1/2Free

Multiple Choice

Q 89Q 89

For the production function Q(K,L) = K

^{0.5}L^{0.5}, the marginal product of capital is: A) K^{-0.5}L^{0.5}. B) 0.5K^{-0.5}L^{0.5}. C) 0.5K^{0.5}L^{-0.5}. D) 0.25X^{-0.5}Y^{-0.5}.Free

Multiple Choice

Q 90Q 90

(Figure: Capital and Labor XIII) A technological change is represented by the movement from point _____ to point _____.
A) X; Z
B) Z; X
C) W; Z
D) Z; W

Free

Multiple Choice

Q 91Q 91

(Figure: Capital and Labor IV) Which of the following statements is (are) TRUE?
A) It is easier for a small amount of additional labor to replace a large amount of capital at point A than at point B.
B) It is easier for a small amount of additional labor to replace a large amount of capital at point B than at point A.
C) The MRTS

_{LK}at point A equals MP_{K}/MP_{L}. D) The MRTS_{LK}at point B is greater than MRTS_{LK}at point A.Free

Multiple Choice

Q 92Q 92

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table. The marginal product of labor for the third unit of labor is ____.
A) 50
B) 40
C) 30
D) 20

Free

Multiple Choice

Q 93Q 93

(Figure: Capital and Labor VII) Based on the isocost line, the ratio of the wage rate (W) to rental rate of capital (R) is:
A) 1.5.
B) 4.0.
C) 0.67.
D) 0.50.

Free

Multiple Choice

Q 94Q 94

Which of the following production functions exhibit(s) constant returns to scale?
I) Q =
II) Q = 2K + L
III) Q = K

^{0.8}L^{0.2}A) II and III B) I and II C) III D) I, II, and IIIFree

Multiple Choice

Q 95Q 95

Suppose that a furniture manufacturer produces tables. The manufacturer's production function is Q(K,L) = 2K

^{0.8}L^{0.2}, where K is the number of wood saws and L is the number of labor hours used to produce tables. The prevailing wage rate is $10 per hour and the rental rate associated with wood saws is $50. The manufacturer has a goal to produce 1,000 units. What Lagrangian equation can be used to solve the manufacturer's cost minimization problem? A) B) C) D)Free

Multiple Choice

Q 96Q 96

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. The marginal product of labor for L = 16, assuming that labor is infinitely divisible, is ____. A) 1 B) 0.75 C) 0.5 D) 0.25Free

Multiple Choice

Q 97Q 97

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. The marginal product of labor for L = 1 is ____. A) 28.28 B) 11.71 C) 9.43 D) 8.99Free

Multiple Choice

Q 98Q 98

Suppose a firm is currently minimizing costs in the long run with marginal product of labor and marginal product of capital given by ½(K/L)

^{1/2}and ½(L/K)^{1/2}, respectively. If the price of capital falls by 50%, the capital-to-labor ratio will: A) decrease by 50%. B) double. C) increase by 50%. D) increase fivefold.Free

Multiple Choice

Q 99Q 99

(Table: Capital and Labor III) What is the equation for this firm's production function?
A) Q = 100K

_{L}B) Q = 100K^{0.5}L^{0.5}C) Q = 100K^{0.25}L^{0.75}D) Q = 100K^{2}LFree

Multiple Choice

Q 100Q 100

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. The average product of labor for L = 3 is ____. A) 1 B) 0.705 C) 0.577 D) 0.5Free

Multiple Choice

Q 101Q 101

Consider the production function Q = Af(K, L). Which of the following statements is (are) TRUE?
I) An increase in total factor productivity growth is represented by an increase in K or L.
II) An increase in total factor productivity growth means that the same amount of output can be produced using fewer inputs.
III) If A increases by 10%, the amount of output produced will increase by 10%, holding the quantity of inputs fixed.
A) II
B) I, II, and III
C) II and III
D) I

Free

Multiple Choice

Q 102Q 102

The short-run production function for a firm is given by Q = 10L

^{0.5}. What is the marginal product? A) B) C) D)Free

Multiple Choice

Q 103Q 103

Suppose the wage rate is $25 per hour and the rent on capital is $50 per hour. The equation for the isocost line is given by:
A) C = 75LK.
B) C = 25L + 50K.
C) C = 75(L + K).
D) C = 2K/L.

Free

Multiple Choice

Q 104Q 104

A basic assumption of production is that the firm:
A) cannot borrow money to finance its input expenditures.
B) can buy as much labor and capital as it desires at fixed prices.
C) must bid up the prices of labor and capital in order to produce more output.
D) has a downward-sloping budget constraint.

Free

Multiple Choice

Q 105Q 105

Consider the following production functions along with their corresponding marginal product of labor function.
I. Q = 15KL, where MP

_{L}= 15K II. Q = 2K^{0.4}L^{0.6}, where MP_{L}= III. Q = 8K + L, where MP_{L}= 1 a. In each case, what happens to the marginal product of labor as the firm uses more labor? b. In each case, what happens to the marginal product of labor as the firm uses more capital?Free

Essay

Q 106Q 106

Suppose the production function for a coffee shop is:
Q = 2K + 5L
where Q is the number of cups of coffee produced, K is the number of coffee makers, and L is the number of workers. Use calculus to:
a. determine a function for the marginal product of labor.
b. determine a function for the marginal product of capital.
c. find the marginal rate of technical substitution.
d. discuss how MRTS

_{LK}changes as the firm uses more labor, holding output constant.Free

Essay

Q 107Q 107

Define a production function and give an example of a Cobb-Douglas production function with constant returns to scale.

Free

Essay

Q 108Q 108

Answer the following questions.
a. Complete the following table by filling in the missing output values. Assume the production function is given by Q = KL, where Q is units of output, K is units of capital, and L is units of labor.
b. What is the equation for the new production function if total factor productivity increases by 50%? Complete the following table.

Free

Essay

Q 109Q 109

Suppose the production function for a small plumbing company is:
Q = 6KL
where Q is the number of water heaters installed, K is the number of machine hours from plumbing supplies, and L is the number of plumbers.
a. Suppose that the wage rate is $20 per hour and the rental rate of capital is $30 per hour. If the construction company has a contract to install 100 new water heaters, what is the cost-minimizing bundle of capital and labor?
b. Derive the company's expansion path.

Free

Essay

Q 110Q 110

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Suppose that the wage rate is $5 per hour , the rental rate of capital is $10 per hour, and the baker wants to produce 4,000 loaves of bread. Use calculus to: a. derive the firm's demand for labor. b. confirm that the demand for labor satisfies the law of demand.Free

Essay

Q 111Q 111

Suppose that a hot dog vendor uses a cart (K) and his time (L) to make and sell hot dogs. The vendor's production function is
, where Q is the number of hot dogs per day. Suppose that the rental on hot dog carts is $50 per day and that the vendor wants to produce 500 hot dogs per day. Use calculus to:
a. derive the demand for labor.
b. show that the demand for labor satisfies the law of demand.

Free

Essay

Q 112Q 112

The McCue Corporation is a house-painting business. For a standard-sized house, it will use four painters applying paint by brush or two painters applying paint with one paint sprayer. Assume that a paint sprayer can be rented for $50 per day while workers are paid $75 per day. The production function exhibits constant returns to scale. The long-run production function for McCue Corporation will be _____ with a total cost equation of _____.

Free

Essay

Q 113Q 113

(Table: Short-run Production I) The short-run production situation for a firm is listed on this table.
Complete the table.

Free

Essay

Q 114Q 114

Answer the following questions.
a. Suppose that a firm spends $6,000 producing 80 units of output. The rental rate of capital is $600 per hour and the wage rate is $50 per hour. Graph the firm's isocost line and show the values of the horizontal intercept and vertical intercept.
b. The cost function for a firm is given by C = 25K + 50L. What is the slope of the isocost line for C = $10,000 and C = $18,000?
c. Graphically illustrate the effect of a rise in the price of labor on a firm's isocost line.
d. Why do isocost lines have a constant slope?

Free

Essay

Q 115Q 115

(Figure: Production Function VI)
The MP

_{L}at point A is _____, and the AP_{L}is _____. What do your results imply about how AP_{L}will change with increased production?Free

Essay

Q 116Q 116

The production function for laser eye surgery is given by Q = 20K

^{0.5}L^{0.5}, where Q is the number of laser eye surgeries performed per day, K is the number of eye surgery machines (which is fixed at 2 in the short run), and L is the number of employees. a. Write the equation for the firm's short-run production function. b. Write the equation for the firm's short-run average product of labor function. c. Calculate the average product of labor for L = 9 and L = 16. d. Calculate the marginal product of labor for L = 1, L = 2, and L = 3.Free

Essay

Q 117Q 117

A firm spends $12,000 per day producing a good. The wage rate per worker is $200 per day and rental per unit of capital is $600 per day. The equation for the firm's isocost line would be _____.

Free

Essay

Q 118Q 118

(Table: Capital and Labor XIV) Consider the production function that this table shows.
a. Does this production function exhibit a constant return to scale? Explain your answer.
b. How many units of output are produced with 4 units of labor and 2 units of capital?
c. Suppose the firm is using 3 units of capital and 2 units of labor and then decides to employ a third worker. What is the marginal product of the third worker?
d. Suppose the firm is using 1 unit of labor and 1 unit of capital. What is the marginal product of capital for K = 2, K = 3, and K = 4? Does return on capital diminish?

Free

Essay

Q 119Q 119

Here is a copy of your friend's class notes on the nine basic assumptions of producer behavior:
1. The firm produces two goods.
2. The firm has already decided which product to produce.
3. The firm's goal is to produce as much output as possible at minimum cost.
4. The firm uses only capital and labor inputs in making its product.
5. In the short run and long run, both labor and capital inputs are fixed.
6. In general, the more inputs a firm uses, the more output it produces.
7. There are constant marginal returns to labor and capital.
8. As the firm buys more labor and capital inputs, the increased demand raises input prices.
9. The firm's budget constraint is negatively sloped.
Because your friend was half-asleep during class, they may have errors in their notes. Correct the errors in their notes where necessary.

Free

Essay

Q 120Q 120

A company has the production function Q = min{K, L}. The price of capital is $50 per unit while the price of labor is $75 per unit. On a graph, plot isoquants for quantities 10, 20, and 30, as well as the isocost line for a quantity of 20. Note the cost-minimizing levels of capital and labor on your graph given the target production level of 20 units.

Free

Essay

Q 121Q 121

(Figure: Capital and Labor XVI) The cost-minimizing combination of capital and labor to produce 10 units of output is _____ and _____, respectively, given prices of $10 and $50, respectively. What is the total cost?

Free

Essay

Q 122Q 122

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. a. Suppose that the wage rate is $5 per hour and the rental rate of capital is $10 per hour. If the bakery wants to produce 4,000 loaves of bread, what is the cost-minimizing bundle of capital and labor? b. Derive the firm's expansion path.Free

Essay

Q 123Q 123

For each of the following production functions, determine whether they exhibit constant, decreasing, or increasing returns to scale.
a. Q = 4KL
b. Q = K

^{1/3}L^{2/3}c. Q = K^{1/3}L^{1/3}d. Q = min(K, 4L) e. Q = 6K + 3LFree

Essay

Q 124Q 124

Suppose the production function for a car manufacturer is:
Q = 2K

^{2}L^{2}where Q is the number of cars produced, K is the number of machine hours used, and L is the number of worker hours used. Use calculus to: a. determine a function for the marginal product of labor. b. determine a function for the marginal product of capital. c. find the marginal rate of technical substitution. d. discuss how MRTS_{LK}changes as the firm uses more labor, holding output constant.Free

Essay

Q 125Q 125

Suppose the firm's production function is Q = 2KL, where Q is units of output, K is units of capital (which are fixed at 2), and L is units of labor.
a. Graph the firm's short-run production function.
b. Graph the firm's AP

_{L}and MP_{L}functions. c. Does this firm have diminishing marginal returns? Explain your answer.Free

Essay

Q 126Q 126

A firm spends $12,000 per day producing a good. The wage per worker is $200 per day and rental per unit of capital is $400 per day. The firm faces the production function Q = 3K

^{1/3}L^{2/3}with MP_{K}= L^{2/3}/K^{2/3}and MP_{L}= 2K^{1/3}/L^{1/3}. The cost-minimizing level of capital will be_____ and the cost-minimizing level of labor will be _____.Free

Essay

Q 127Q 127

Answer the following questions.
a. At Dippy's Amusement Park, it takes two workers to operate an amusement park ride. Each amusement park ride is capable of providing 400 rides per day. Draw the production isoquant corresponding to 2,000 amusement park rides.
b. Draw two production isoquants: one showing that labor and capital are close substitutes and the other showing that labor and capital are not close substitutes.
c. Draw a production isoquant corresponding to the production function Q = 2K + L.

Free

Essay

Q 128Q 128

You've been asked by your manager to choose between the following three production functions based on returns to scale:
Q = 10K

^{2}L^{1}Q = 10K^{0.5}L^{0.5}Q = 10K^{0.25}L^{0.5}She would like you to choose the one that exhibits increasing returns to scale and to provide evidence to support your decision.Free

Essay

Free

Essay

Q 130Q 130

Answer the following questions.
a. Mathematically, why would the average product of labor decrease as a firm hires more workers?
b. If capital inputs cannot be adjusted, what must eventually happen to the marginal product of labor as the firm hires more workers?
c. Graph a production function that exhibits diminishing marginal product of labor.

Free

Essay

Q 131Q 131

Suppose the firm's production function is Q = K

^{1/3}L^{2/3}, where the MPK = and MP_{L}= . a. If the rental rate of capital R = $30 and the wage rate W = $40, what is the cost-minimizing capital-to-labor ratio? b. If the rental rate of capital R is $35 and the wage rate W is $70, how many units of labor and capital should the firm use to produce 12 units of output?Free

Essay

Q 132Q 132

Suppose that a firm's production function is
. Use calculus to find the marginal rate of technical substitution and discuss how MRTS

_{LK}changes as the firm uses more labor, holding output constant.Free

Essay

Q 133Q 133

A firm has the production function Q = K

^{0.1}L^{0.9}, where Q measures output, K represents machine hours, and L measures labor hours. Suppose that the wage rate is $45, and the firm wants to produce 100,000 units of output. Use calculus to: a. derive the demand for capital. b. confirm that the demand for capital satisfies the law of demand. c. determine the optimal level of capital if the rental rate on capital is $25.Free

Essay

Q 134Q 134

(Figure: Capital and Labor XVI) Consider the production function Q = L

^{0.5}K^{0.5}, with MP_{K}= L^{0.5}/K^{0.5}and MP_{L}= K^{0.5}/L^{0.5}. a. Define the marginal rate of technical substitution. b. Calculate the marginal rate of technical substitution for K = 5 and L = 10. c. Figure 6.16 shows an isoquant based on the production function referred to in the question. Calculate the slope of the isoquant at point A and point B.Free

Essay

Q 135Q 135

Suppose that a firm's production function is
. Use calculus to find the marginal rate of technical substitution and discuss how MRTS

_{LK}changes as the firm uses more labor, holding output constant.Free

Essay

Q 136Q 136

(Figure: Production Function V) Refer to the production function, which has a slope of 1/L

^{0.5}. a. Calculate the average product of labor for L = 1, L = 2, and L = 3. b. Calculate the marginal product of labor for L = 1, L = 4, and L = 16, assuming that labor is infinitely divisible.Free

Essay

Q 137Q 137

Suppose the production function for a bakery is:
Q = 4K

^{0.4}L^{0.6}where Q is the number of loaves of bread produced per day, K is the number of ovens, and L is the number of workers employed. Use calculus to: a. determine a function for the marginal product of labor. b. determine a function for the marginal product of capital. c. find the marginal rate of technical substitution. d. discuss how MRTS_{LK}changes as the firm uses more labor, holding output constant.Free

Essay

Q 138Q 138

(Figure: Capital and Labor XV) Answer the following questions.
a. Define isoquant.
b. In this figure, what things are wrong with the isoquants?

Free

Essay

Q 139Q 139

The production function for a firm is Q = min(2K, L). The price per unit of capital is $40, and the price per unit of labor is $60.
a. What is the minimum cost of producing 10 units of output?
b. Using an isoquant and isocost line, illustrate the cost-minimizing input choice of the firm producing 10 units of output.

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Essay

Q 140Q 140

For the following questions, assume that the marginal product of capital =
and the marginal product of labor =
.
a. If the firm is hiring 10 workers at $100 per worker and 5 units of capital at $50 per unit, is the firm minimizing its cost of production? If not, what should the firm do?
b. If the firm is hiring 10 workers at $100 per worker and 5 units of capital at $200 per unit, is the firm minimizing its cost of production? If not, what should the firm do?
c. If the firm is minimizing its costs of production by hiring an equal number of workers and units of capital, what is the slope of the isocost line?

Free

Essay

Q 141Q 141

Suppose that a firm's production function is given by Q = KL (MP

_{K}= L and MP_{L}= K), where Q is quantity of output, K is units of capital, and L is units of labor. The price per unit of labor and capital are $30 and $20, respectively. a. How many units of labor and capital should the firm use if it wants to minimize the cost of producing 600 units of output? b. Suppose that the firm makes a technological change, transforming its production function to Q = 1.23KL (MP_{K}= 1.23L and MP_{L}= 1.23K). What is the minimum cost of producing 600 units of output?Free

Essay

Q 142Q 142

Assume that Chia Pets International has the production function Q = K + 2L. If the price of capital is $50 and the price of labor is $50, graphically determine this company's expansion path.

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Essay