Q 26

An orange grower has discovered a process for producing oranges that requires two inputs. The production function is Q = min{2x1, x2}, where x1 and x2 are the amounts of inputs 1 and 2 that he uses. The prices of these two inputs are w1 = $5 and w2 = $10, respectively. The minimum cost of producing 160 units is therefore
A) $2,000.
B) $2,400.
C) $800.
D) $8,000.
E) $1,600.

Q 27

Roberta runs a dress factory. She produces 50 dresses per day, using labor and electricity. She uses a combination of labor and electricity that produces 50 dresses per day in the cheapest possible way. She can hire as much labor as she wants at a cost of 20 cents per minute. She can use as much electricity as she wants at a cost of 10 cents per minute. Her production isoquants are smooth curves without kinks and she uses positive amounts of both inputs.
A) The marginal product of a kilowatt-hour of electricity is twice the marginal product of a minute of labor.
B) The marginal product of a minute of labor is twice the marginal product of a kilowatt-hour of electricity.
C) The marginal product of a minute of labor is equal to the marginal product of a kilowatt-hour of electricity.
D) There is not enough information to determine the ratio of marginal products. We'd have to know the production function to know this.
E) The marginal product of a minute of labor plus the marginal product of a kilowatt-hour of labor must equal.

Q 28

A competitive firm has the three-factor production function f (x, y, z) = . The factor prices used to be wx = $1, wy = $2, and wz = $3. Suppose that the price of factor y doubled while the other two prices stayed the same. Then the cost of production
A) increased by more than 10% but less than 50%.
B) increased by 50%.
C) doubled.
D) stayed the same.
E) increased by more than 50% but did not double.