Question 1

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

Accepted Answer

The expansion path for a Leontief production function like C = min(B,W) is determined by the fixed input ratio, not by the prices of the inputs.

Question 2

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.The expansion path depends

Accepted Answer

The expansion path depends on the relative prices of corn and soybean-based feed. As P = 2C + 5S, the farmer will choose the combination of inputs that minimizes the cost of producing a given level of output. Thus, the optimal choice of inputs will depend on the relative prices of corn and soybean-based feed. If the price of corn-based feed is less than 2/5 the price of soybean-based feed, the farmer will use only corn-based feed for production, as it is relatively cheaper. If the price of corn-based feed is greater than 2/5 the price of soybean-based feed, the farmer will use a combination of corn and soybean-based feeds, as soybean-based feed is relatively cheaper.

Question 3

The accountant's cost of producing a bicycle refers to

Accepted Answer

The accountant's cost of producing a bicycle refers to the out-of-pocket payments made to produce the bicycle, such as the cost of materials, labor, and any other expenses directly related to production. This cost does not take into account the opportunity cost (value of goods given up) or retail price of the bicycle. The marginal cost may be part of the cost calculation, but it is not the definition of the accountant's cost.

Question 4

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average total cost is

Accepted Answer

The average total cost is the total cost divided by the quantity produced. So, ATC = TC/q = (Aq³ + bq² + cq + d)/q = Aq² + bq + c + d/q.

Question 5

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run marginal cost is

Accepted Answer

The answer of Suppose a production function is q =...

Question 6

Suppose a cost function is TC = Aq³ + bq² + cq + d then the total fixed cost is

Accepted Answer

The total fixed cost is represented by the constant term d, which does not change with the quantity produced or any of the input prices. Therefore, the correct choice is D.

Question 7

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Accepted Answer

The production function is C = min(B,W), which means the quantity of coffee produced is limited by whichever input (beans or water) is in shorter supply. Given the prices of beans and water, we want to minimize the cost of producing a given quantity of coffee. The cost-minimizing combination of inputs occurs where the marginal cost of beans is equal to the marginal cost of water, which is 10 times the price ratio of beans to water. Since the price ratio is 10 to 1, the equation for the expansion path is B = W. Therefore, the best choice is to use equal amounts of beans and water, since that would minimize costs while still satisfying the production function.

Question 8

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Accepted Answer

The answer of Suppose a production function is q =...

Question 9

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average variable cost is

Accepted Answer

The average variable cost is calculated as the total variable cost (TVC) divided by the quantity (q). Since TVC in this cost function is represented by bq² + cq, the average variable cost can be written as (bq² + cq)/q. Simplifying this expression yields Aq² + bq + c / q. This matches option B.

Question 10

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Accepted Answer

The answer of Suppose a production function is q =...

Question 11

The opportunity cost of producing a bicycle refers to

Accepted Answer

The opportunity cost of producing a bicycle refers to the value of the goods or services that were given up in order to produce the bicycle. It includes not only the direct costs such as materials and labor, but also the indirect costs of the alternatives that were forgone in choosing to produce the bicycle.

Question 12

Suppose MP_L = 40 and MP_K = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Accepted Answer

The formula for calculating the efficient level of production (where MPK is the marginal product of capital and MPL is the marginal product of labor) is: MPL / W = MPK / R Plugging in the given values: MP_L / W = MP_K / R 40 / W = 20 / 10 Solving for W: W = 40 / 2 W = 20 Therefore, the wage rate must be $20 for the level of production to be efficient.

Question 13

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $4 and corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Accepted Answer

The answer of Suppose pigs (P)can be fed corn-based feed...

Question 14

Suppose the production function for coffee (C)is C = min(B,W)where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Accepted Answer

To minimize cost, we need to choose the input that has the lowest cost per unit of output. In this case, the cost per unit of water is $.10 per gallon, while the cost per unit of beans is $10 per pound. Therefore, the cost-minimizing combination will involve using as much water as possible, since it is the cheaper input.

For C=200, we need to produce 200 units of coffee using the production function C = min(B,W). Since we want to use as much water as possible, we will set W = 200 gallons. Then we solve for B:

C = min(B,W) 
200 = min(B,200) 
B = 200

Therefore, the cost-minimizing combination is B=200, W=200 gallons. The total cost will be:

Cost = (10 per pound)(200 pounds) + ($.10 per gallon)(200 gallons) 
Cost = $2000 + $20 
Cost = $2020

Any other combination that produces 200 units of coffee would have a higher cost. For example, if we used only beans (B=200) and no water, the cost would be:

Cost = (10 per pound)(200 pounds) + ($.10 per gallon)(0 gallons) 
Cost = $2000 + $0 
Cost = $2000

This is more expensive than using 200 gallons of water and 200 pounds of beans.

Question 15

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost minimizing combination of producing P = 200?

Accepted Answer

The answer of Suppose pigs (P)can be fed corn-based feed...

Question 16

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK)^1/2 where L is labor hours and K is the amount of capital (mowers and trimmers).The expansion path depends on

Accepted Answer

The expansion path is determined by both the wage rate and the rental rate, as the production function includes both variables (L and K). An increase in either input will lead to a change in the amount of output produced, and thus affect the shape of the expansion path. Therefore, the answer is C: both the wage and rental rates.

Question 17

Suppose MP_L = 20 and MP_K = 40 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Accepted Answer

For production to be efficient, the ratio of marginal products to their respective input prices must be equal. Given MP_L = 20, MP_K = 40, and the rental rate on capital is $10, the wage rate must be $5 to satisfy the condition: MP_L/wage = MP_K/rental rate, i.e., 20/wage = 40/10. Solving gives wage = $5.

Question 18

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K)is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run average cost is

Accepted Answer

The answer of Suppose a production function is q =...

Question 19

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Accepted Answer

The cost-minimizing combination is the point on the isoquant where the ratio of the marginal products of the two inputs is equal to the ratio of their prices. In this case, the marginal product of corn feed is 2 and the marginal product of soybean feed is 5. The ratio of these marginal products is 2/5, which is equal to the ratio of the prices of the two inputs, $2/$5. Therefore, the cost-minimizing combination is the point on the isoquant where the slope of the isoquant is -2/5. This point is (C = 25, S = 10).

Question 20

Suppose pigs (P)can be fed corn-based feed (C)or soybean-based feed (S)such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

Accepted Answer

The answer of Suppose pigs (P)can be fed corn-based feed...

Quiz 7: Costs

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.The expansion path depends

The accountant's cost of producing a bicycle refers to

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average total cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run marginal cost is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the total fixed cost is

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average variable cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

The opportunity cost of producing a bicycle refers to

Suppose MP_L = 40 and MP_K = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $4 and corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost minimizing combination of producing P = 200?

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK) ^1/2 where L is labor hours and K is the amount of capital (mowers and trimmers) .The expansion path depends on

Suppose MP_L = 20 and MP_K = 40 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run average cost is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

Quiz 7: Costs

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.The expansion path depends

The accountant's cost of producing a bicycle refers to

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average total cost is

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run marginal cost is

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the total fixed cost is

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.The expansion path is

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Suppose a cost function is TC = Aq3 + bq2 + cq + d then the average variable cost is

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

The opportunity cost of producing a bicycle refers to

Suppose MPL = 40 and MPK = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $4 and corn feed is on the horizontal axis,and the price of soybean feed is $5 and soybean feed lies on the vertical axis,what is expansion path?

Suppose the production function for coffee (C) is C = min(B,W) where B = beans in pounds and W = water in gallons and the price of water is $.10 per gallon and the price of beans is $10 per pound.the cost minimizing combination of beans and water for C = 200 is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $6,what is the cost minimizing combination of producing P = 200?

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK) 1/2 where L is labor hours and K is the amount of capital (mowers and trimmers) .The expansion path depends on

Suppose MPL = 20 and MPK = 40 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose a production function is q = K1/2L1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run average cost is

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $2 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 100?

Suppose pigs (P) can be fed corn-based feed (C) or soybean-based feed (S) such that the production function is P = 2C + 5S.If the price of corn feed is $4 and the price of soybean feed is $5,what is the cost minimizing combination of producing P = 200?

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average total cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run marginal cost is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the total fixed cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run production function is

Suppose a cost function is TC = Aq³ + bq² + cq + d then the average variable cost is

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the fixed cost is

Suppose MP_L = 40 and MP_K = 20 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose that a lawn mowing services production function for lawns mowed in a week is M = (LK) ^1/2 where L is labor hours and K is the amount of capital (mowers and trimmers) .The expansion path depends on

Suppose MP_L = 20 and MP_K = 40 and the rental rate on capital is $10.If the level of production is currently efficient the wage rate must be

Suppose a production function is q = K^1/2L^1/3 and in the short run capital (K) is fixed at 100.If the wage is $10 and the rental rate on capital is $20,the short run average cost is