Deck 10: Production and Cost Estimation

Question 1

estimating a short-run average variable cost function,

A)the intercept must be forced to equal zero.
B)the cost data must be inflation-adjusted.
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

Answer 1

D

Question 2

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

Answer 2

C

Question 3

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

Answer 3

E

Question 4

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

Question 5

A linear specification,Q = aK + bL,is not appropriate for estimating a production function because

A)the marginal products of the inputs are assumed 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

Question 6

average variable cost function is estimated as Which of the following cost functions is associated with this estimate?

A)SMC = 96 - 4Q + 0.1Q²
B)TVC = 96Q - 2Q² + 0.05Q³
C)TVC = 96Q + 4Q² + 0.15Q³
D)SMC = 96 - 4Q + 0.15Q²
E)both b and d

Question 7

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

Question 8

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

Question 9

Which of the following represents a short-run cubic production function?

A)
B)
C)
D)
E)all of the above

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

a cubic production function of the form ,in order for the average and marginal product functions to have their usual 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

Question 15

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

Question 16

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

Question 17

theoretical restriction on the short-run cubic cost equation,TVC = aQ + bQ + cQ²,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 < 0

Question 18

Which of the following is an estimable form of a production function?

A)Q = fL,K)
B)Q = fL, )
C)
D)all of the above
E)none of the above

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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.

Question 25

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)

Question 26

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

Question 27

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

Question 28

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
C)$2,348
D)$4,428

Question 29

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

Question 30

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

Question 31

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

Question 32

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 L³ and L²,respectively.
B)suppress the intercept term regress through the origin).
C)convert the right-hand-side variables to logarithms.
D)both a and b
E)both b and c

Question 33

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

Question 34

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

Question 35

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

Question 36

For the short-run cost function AVC = a + bQ + cQ²,

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 above

Question 37

A firm estimates its long-run production function to be Suppose the firm employs 12 units of capital.The product curves)in the short-run are

A)TP = -12.96 L³ + 1,728L².
B)AP = -12.96 L³ + 1,728L².
C)MP = -38.88 L² + 3,456L.
D)both a and b
E)both a and c

Question 38

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

Question 39

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

Question 40

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

Question 41

The manager of Greene Enterprises,Inc.,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

A)rising
B)falling
C)greater than short-run marginal cost
D)less than short-run marginal cost
E)both b and c

Question 42

The manager of Greene Enterprises,Inc.,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

Question 43

The manager of Greene Enterprises,Inc.,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

Question 44

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

Question 45

The manager of Greene Enterprises,Inc.,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

Question 46

The manager of Greene Enterprises,Inc.,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

Question 47

The manager of Greene Enterprises,Inc.,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

Question 48

The manager of Greene Enterprises,Inc.,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

Question 49

The manager of Greene Enterprises,Inc.,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

Question 50

The manager of Greene Enterprises,Inc.,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

Question 51

The manager of Greene Enterprises,Inc.,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

Question 52

The manager of Greene Enterprises,Inc.,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

Question 53

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

Question 54

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

Question 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 - 2Q² + 0.05Q³
B)SMC = 96 - 4Q + 0.1Q²
C)TVC = 96Q + 4Q² + 0.15Q³
D)AVC = 96 - 2Q + 0.05Q²
E)a and d