&quot;econPractice - Production and Cost02-25

# &quot;econPractice - Production and Cost02-25 - 20 The...

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20. The short run supply curve for a firm in a perfectly competitive industry is: a) the marginal cost curve above minimum average total cost. b) the marginal cost curve above minimum average variable cost and below minimum average total cost. c) the marginal cost curve above minimum average variable cost. d) None of the above. A production isoquant (Q = 1000 units) for Acme Corporation is shown below: To attract and retain quality labor Acme is paying a wage w = 100. The rental rate of capital r = 50. 8. Acme minimizes the cost of producing 1,000 units of output employing _____ units of capital. a) 2 b) 4 c) 6 d) 8 e) 10 9. Acme’s minimum cost per unit at a production level of 1,000 units equals: a) 0.60 b) 0.80 c) 1.40 d) 2.00 e) 2.50 10. Suppose the rental rate of capital rises to 200. The competitive wage remains equal to 100. If Acme is unable to adjust its use of capital in the short run , its minimum cost per unit at a production level of 1,000 units will equal: a) 1.00 b) 1.20 c) 1.40 d) 2.00 e) 3.00 5 0 5 10 15 15 10 Q = 1000 K L

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11. Suppose the rental rate of capital rises to 200. The competitive wage remains equal to 100. In the long run , Acme will employ ______ units of labor to minimize the cost of producing 1,000 units of output a) 2 b) 4 c) 6 d) 8 e) 10 12. Suppose the rental rate of capital rises to 200. The competitive wage remains equal to 100. In the long run , Acme’s minimum cost per unit at a production level of 1,000 units will equal: a) 1.40 b) 1.60 c) 2.00 d) 2.40 e) 2.80 16. In a market characterized by perfect competition we expect in the long run: a) P = MC d) All of the above b) P = min ATC e) None of the above c) Economic Profit = 0 J.K. Enterprise’s production function is Q = 100 min{3K, L}. In competitive factor markets it must pay a wage w = 100 per unit of labor and a rental rate of capital r = 200 per unit of capital. 17. J.K. Enterprise’s production technology is: a) Cobb-Douglas b) Leontief c) Linear d) None of the above. 18 At a level of production of Q= 1200, J.K. Enterprise’s minimum per unit cost of production equals: a) 0.67 b) 1.00 c) 1.33 d) 1.67 e) 2.00 2. To maximize profits, a firm should continue to increase production of a good until: a) Total revenue equal total cost c) Marginal revenue equals marginal cost b) Marginal revenue equals zero d) Average cost equals average revenue 7. The long run supply curve for a firm in an industry characterized by perfect competition is: a) the marginal cost curve above minimum average total cost. b) the marginal cost curve above minimum average variable cost. c) the marginal cost curve. d) None of the above. 9. You are hired as a consultant by a firm which is presently paying a wage equal to 25 and a rental rate of capital equal to 50. You estimate the marginal product of labor equals 30 and the marginal product of capital equals 75. Based upon these estimates you would recommend that the firm ______ its employment of labor and _______ its employment of capital to reduce per-unit costs at its
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## This note was uploaded on 04/12/2011 for the course ECON 415 taught by Professor Holland during the Spring '09 term at Purdue.

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&quot;econPractice - Production and Cost02-25 - 20 The...

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