The Theory and Estimation of Production and Costs

The Theory and Estimation of Production and Costs

???????????????????????????????????????????Question 11) The term Production Function refers to the:Use of machinery and equipment in productionRelationship between costs and output Relationship between inputs and outputRole of labor unions

Question22) The production period in which at least one input is fixed in quantity is the:Production runLong runShort runPlanning horizon

Question 33) The difference between the short-run and the long-run is:A) three months or one business quarter.B) the time it takes for firms to change all production on inputs.C) the time it takes for firms to change only their variable inputs.D) More information is required to answer this question.

Question44) In a call center, which of the following situations be considered as a variable input in the short- run?A) the level of computer-telephony software being utilizedB) the number of call center representatives on duty at the centerC) the number of call center managers or supervisorsD) the size (e.g., square footage) of the call center

Question 5 Which of the following holds true?

When the Marginal Product (MP) is rising, Marginal cost (MC) is rising; and when MP is falling, MC is falling.When MP is rising, MC is falling, and when MP is falling, MC is rising.When MP is rising, MC is constant, and when MP is falling, MC is negativeThere is no relationship between MP and MC.

Question66). The marginal product of the variable input:is always positivetypically falls then risesis equal to the total product divided by the total amount of the variable input employednone of the above

Question 77) Which of the following statements about the short-run production function is true?A) MP always equals AP at the maximum point of MP.B) MP always equals zero when TP is at its maximum point.C) TP starts to decline at the point of diminishing returns.D) When MP diminishes, AP is at its minimum point.E) None of the above is true.

Question 88) Output (Total Product) is maximized whenA) average productivity is at its maximum.B) the "law of diminishing returns" sets in.C) marginal productivity is zero.D) marginal productivity is at its maximum.

Question 9 If a firm finds itself operating in Stage I, it implies thatA) variable inputs are extremely expensive.B) it overinvested in fixed capacity.C) it underinvested in fixed capacity.D) fixed inputs are extremely expensive.Question 10 A firm that operates in Stage III of the short-run production functionA) has too much fixed capacity relative to its variable inputs.B) has too little fixed capacity relative to its variable inputs.C) has greatly overestimated the demand for its output.D) should try to increase the amount of variable input used.

Question 11 Stage III of the short-run Production Function isA) the most efficient mix of inputs.B) the least costly level of output.C) where additional units of inputs will lead to less output.D) where additional units of inputs will lead to more output.

Question 12 In the long run, a firm is said to be experiencing decreasing returns to scale if a 10 percent increase in inputs results inA) an increase in output from 100 to 110. B) a decrease in output from 100 to 90.C) an increase in output from 100 to 105. D) a decrease in output from 100 to 85.

Question 13 An isoquant indicatesA) different combinations of two inputs that can be purchased for the same amount of money.B) different combinations of two inputs that can produce the same amount of output.C) different combinations of output that can be produced with the same amount of input.D) different combinations of output that cost the same amount to produce.

Question 14Marginal rates of technical substitution (MRTS) representA) the optimum combinations of inputs.B) cost minimizing combinations of inputs.C) the degree to which one input can replace another without output changing.D) All of the above.Question 15The following is not one of the strengths of the Cobb-Douglas production function:A) Both marginal product and returns to scale can be estimated from it.B) It can be converted into a linear function for ease of calculation.C) It shows a production function passing through increasing returns to constant returns and then to decreasing returns.D) The sum of the exponents indicates whether returns to scale are increasing, constant or decreasing.

Question 16 The following Cobb-Douglas production function, Q = 1.8L0.74K0.36, exhibitsA) increasing returns. B) constant returns.C) decreasing returns. D) Both A and B.

Question 17 When is it not in the best interest of a company to hire additional workers in the short run?A) when the average good of labor is decreasingB) when the firm is in Stage II of the production processC) when the marginal revenue good equals zeroD) when the wage rate is equal to or greater than labor's marginal revenue good

Question 18 Which of the following combination of inputs is most closely reflective of decreasing marginal rate of technical substitution (MRTS)?A) oil and natural gas B) sugar and high fructose corn syrupC) computers and clerks D) keyboards and computers

Question 19 Isocost curves representA) least cost combinations of inputs.B) combinations of inputs that can be purchased given their prices and the funds available.C) a producers cost function.D) None of the above.

Question 20 If a firm used a combination of inputs that was to the left of its isocost line, it would indicate thatA) it is exceeding its budget.B) it is not spending all of its budget.C) it is operating at its optimal point because it is saving money.D) None of the above.

Question 21 Which of the following cost relationships is not true?A) AFC = AC - MCB) TVC = TC - TFCC) The change in TVC/the change in Q = MC.D) The change in TC/ the change in Q = MC.

Question 22 The distinction between sunk and incremental costs is most helpful in answering which question?A) How many more people should be added to the production process?B) What is the correct price to charge?C) Should we begin to build a new factory?D) Should we continue developing a new software application that we began last year?

Question 23 The relationship between MC and AC can best be described as follows:A) when AC increases, MC starts to increase.B) when MC increases, AC starts to increase.C) when MC decreases, AC decreases.D) when MC exceeds AC, AC starts to increase.

Question 24 MC increases becauseA) MC naturally increases as firm nears capacity.B) labor is paid overtime wages when volume increases.C) in the short run, MC always increases.D) the law of diminishing returns takes effect.Second roundQ1 Industry supply and demand are given by: QD = 1000 - 2P and QS = 3Pa. What is the equilibrium price and quantity?b. At a price of $100, will there be a shortage or a surplus, and how large will it be?c. At a price of $300, will there be a shortage or a surplus, and how large will it be?

solutiona.P = $200, Q = 600.b. At a price of $100, there will be a shortage. The quantity demanded will be 800, and the quantity supplied will be 300, and thus there will be a shortage of 500 units.c. At a price of $300, there will be a surplus. The quantity demanded will be 400, and the quantity supplied will be 900, and thus there will be a surplus of 600 units.

Q2A good's Demand Curve is: Qd = 25 - P, and its Supply Curve is: Qs = 10 + 2P.

a. When P = $20, what is the difference, if any, between Qd and Qs?b. When P = $3, what is the difference, if any, between Qd and Qs?c. What are the equilibrium values of P and Q?

solutiona. Qd = 5 and Qs = 50b. Qd = 22 and Qs = 16c. Q = 20 and P = $5

Q 3List the major non-price determinants of demand.

solutionConsumer preferences (tastes), income, prices of related goods (complements and substitutes), future expectations, and number of buyers.

Q 4 List the major non-price determinants of supply.

solutionInput costs, technology, prices of other goods that can be sold by the firm(complements and substitutes), future expectations, weather conditions, and number of sellers.